By Sun Huixia

Columbia Journalism School ‘12

Once darlings of American stock exchanges, mainland China-based companies crashed a year ago when a few short-sellers spotted accounting irregularities and fraud in some of them. Now, the so-called China Concept Stocks are coming back.

Against the backdrop of bleak economic prospects in Japan and Europe, China is growing rapidly and its prospects are bright, even after the government’s recent downward revision to its growth forecast. An abundant supply of cheap labor, well-developed infrastructure and the world’s largest foreign-exchange reserves have helped fuel the boom and should continue to do so.

Investors looking to make an investment in China might want to consider a CCS company that took collateral damage from the accounting scandals but is now on the rise.

A Thomson/Reuters stock screen of Chinese companies that are down at least 50% from their 52-week highs but have risen at least 20% so far this year should yield companies with some justifiable momentum.

Among the 26 companies that met the criteria, most are solar energy or Internet companies. Chinese solar panel companies are not likely to rebound soon because of a glut of supply in the global market. The problem with most dot-coms is that they rarely generate large profits. However, VanceInfo Technologies, an information technology consulting and outsourcing company, presents an interesting opportunity.

First, VanceInfo is growing. VanceInfo reported fourth-quarter revenues of $87 million, up 46 percent from the same period in 2010. For the full year, the company reported revenues of $283 million, up 34 percent from 2010.

VanceInfo’s gross margin dipped to 32% in the fourth quarter of 2011, down from 38% during the year-ago period. The decline reflected growing wage expenses (the number of engineers on staff exploded) and investments in the company’s U.S. delivery team, which are likely to boost revenues over the next few quarters.

China is behind India in the outsourcing market, but it is closing the gap. In India, outsourcing now generates about $70 billion a year in business. Some analysts value the Chinese sector at $20 billion. The brokerage group CLSA predicts it will hit $30 billion by 2014.

It may take years for VanceInfo to play the same league as the Indian giants, but even today the company lists blue chips such as Microsoft, 3M, IBM and Citibank among its customers. VanceInfo, set up in 1994 in Beijing, has a steady supply of inexpensive graduates.

Austerity is part of the company’s corporate culture. When the company’s chief financial officer learned he had been booked on a flight in business class, he quickly downgraded to coach.

This article was written for the Columbia Journalism Schools seminar on business journalism in the spring of 2012.